China warned on Thursday its economic downturn was deepening with the spread of the global financial crisis and a senior European policymaker said woes could extend beyond 2009.
In India, emerging Asia's other economic titan, financial markets were closed after Islamist militants killed more than 100 people in the commercial capital Mumbai.
Violence in India and political unrest in Thailand highlighted political risk as an extra potential threat to emerging markets battered by the global crisis.
"These awful events are reinforcing the nervousness about emerging markets, which have been weak any way for some time after the U.S. slowdown and the domino effect," said Justin Urquhart Stewart, investment director at Seven Investment Management in London.
The economic warnings from China's top planner came a day after its central bank cut interest rates by the biggest margin in 11 years in response to the worst global downturn in decades.
A crisis that began last year with the collapse of the U.S. housing market has spread around the world, bringing several financial institutions to their knees and pushing the United States, Japan and Europe into recession or to the brink of it.
China's State Information Centre, a government think-tank, forecast annual growth would slow to 8 percent this quarter from 9 percent in the third quarter, a rapid cooling from double-digit rates recorded in the past five years.
"The global financial crisis has not bottomed out yet. The impact is spreading globally and deepening in China. Some domestic economic indicators point to an accelerated slowdown in November," Zhang Ping, chairman of the National Development and Reform Commission, told a news conference.
With factories closing by the thousands, Chinese officials have grown increasingly concerned in recent weeks that slowing growth may threaten the stability that the ruling Communist party craves for its 1.3 billion people.
Slowing demand for Chinese exports in the West is curbing growth and there is no relief in sight.
The euro zone is likely to be in recession next year, European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said, reversing a forecast of slight growth made earlier this month.
Almunia would not give a specific forecast for 2009, but said next year may not mark the end of the euro zone's troubles. "The crisis may not end in 2009," he said.
Emphasizing the bleak outlook, the euro zone's business climate indicator fell to its lowest in more than 15 years in November, European Commission data showed.
BANKING WOES
Aggressive interest rate cuts and trillions of dollars in financial sector bailouts and stimulus packages have been the order of the day since the collapse of Lehman Brothers in September, followed by a lending freeze and the spread of financial pain to consumers and businesses.
The world's banking system is still not strong enough to support the economy and avoid a recession, the head of Britain's financial regulator told an Italian newspaper in an interview.
Adair Turner, chairman of Britain's Financial Services Authority, added that the two key issues were bank capital strength and liquidity.
Japan's Norinchukin Bank said it would raise more than $10.5 billion to shore up its capital, the largest fundraising by a Japanese financial firm since the start of the global credit crisis.
Norinchukin, the unlisted central bank for Japan's agricultural and fishery cooperatives, said it plans to raise more than 1 trillion yen ($10.5 billion) through its associated cooperatives by the end of March.
COMPANIES SUFFER
Battered global stocks rose to their highest level in nearly two weeks with European equities buoyed by sharp gains in Asia and the United States, dampening demand for safer assets such as government debt.
European government bond yields crept up as stocks gained ground, ending recent declines that mirrored steep falls in U.S. Treasury yields.
On Wednesday, the U.S. benchmark 10-year yield hit a 50-year low below 3.0 percent after a flood of bleak U.S. economic reports spurred demand for government debt. U.S. markets were closed on Thursday for the Thanksgiving Day holiday.
Despite the share price rises, there was little good news from companies.
Top global miner BHP Billiton cited a drop in China's demand for iron ore when it painted a gloomy outlook for its business and defended its decision to drop a $66 billion bid for rival Rio Tinto.
ArcelorMittal, the world's largest steelmaker, said it was likely to start short-time working and cut production at its German steel plants in December.
Two of Britain's most high profile retailers DSG and Kingfisher underlined the severity of the economic slowdown with downbeat results and gloomy outlooks, while variety story group Woolworths went into administration.
Britain's retailers face a brutal downturn in consumer spending, amid sliding house prices and rising unemployment.
